Meritless whistleblower retaliation claims are on the rise

Recently released statisticsshow a surge in employee complaints of retaliation for blowing the whistle on their employers’ wrongdoing. But they also show that the federal agency charged with investigating such allegations finds few that have merit.

According to Occupational Safety and Health Administration (OSHA) statistics, the agency received 2,787 complaints of whistleblower retaliation in fiscal 2012. OSHA investigates whistleblower claims filed under the Occupational Health and Safety Act and 21 other federal laws. In the vast majority of the cases (1,706), employees alleged retaliation after reporting OSHA health and safety violations. But the agency also received complaints of retaliation from employees who reported financial improprieties under the Sarbanes-Oxley Act, environmental violations, and airline and transportation safety lapses, among others. (Most whistleblower cases under the Dodd-Frank Wall Street Reform and Consumer Protection Act go directly to federal court and therefore are not included in the statistics).

The fiscal 2012 total continued an upward trend: OSHA received 2,158 cases in fiscal 2009; 2,319 in fiscal 2010; and 2,648 in fiscal 2011—a 30 percent increase during that period. Experts say it’s become a nightmare for many employers.

“I track these cases all over the country, and it’s a new thing every day, and the allegations are serious,” says Steven Pearlman, co-head of the whistleblowing and retaliation group at Proskauer Rose. “It starts as an employment retaliation claim, but when the case gets running and the media gets a hold of it, it takes on a life of its own because it implicates a compliance failure. It can be disastrous if not handled right, both from a goodwill standpoint and a money standpoint.”

Groundless Allegations

Particularly galling to employers is the fact that they are frequently dragged through the mud and incur sizeable legal bills over groundless allegations. Approximately three-quarters of the 2012 complaints OSHA received were dismissed or withdrawn. About 21 percent were settled, and just 2 percent were found to merit OSHA action.

Edward Ellis, co-chair of the whistleblowing and retaliation practice at Littler Mendelson, points out that although the number of complaints has increased substantially, the number of claims found to be meritorious has not. That number was 58 in 2009; 44 in 2010; 55 in 2011; and 48 in 2012.

“Although the number of complaints is up, the number of favorable determinations by OSHA is not,” Ellis says. “This means they are getting more claims but not better claims.”

Ellis says OSHA is encouraging more whistleblowers to come forward, but with dubious results.

“They are creating more work both for the government and for employers, but they are not creating more good cases, which means they are wasting more time on bad cases,” he says. “The woods are full of people with performance problems who accuse the boss of doing something unlawful and think they are bulletproof after they make the complaint.”

Penalty Provisions

Dealing with meritless cases is one concern, but employers also must be cognizant of the potential costs of a whistleblower case that results in an OSHA-imposed penalty. Those judgments can include reinstatement of the whistleblower, which can be disruptive to the business, and large monetary awards.

OSHA has taken a particularly hard line against a railroad it says has repeatedly fired workers who reported workplace injuries. In its most recent judgment, OSHA on Feb. 28 ordered Norfolk Southern Railway Co. to pay $1.12 million to three workers, saying the company violated the whistleblower provisions of the Federal Railroad Safety Act. OSHA also ordered the company to expunge the workers’ disciplinary records, post a notice regarding whistleblower protection rights and train workers on these rights.

In June 2012, OSHA ordered the railroad to pay more than $800,000 to three whistleblowers it had fired for reporting workplace injuries. And in August 2012, OSHA ordered it to pay more than $932,000 to two workers fired for same reason.

“The Labor Department continues to find serious whistleblower violations at Norfolk Southern, and we will be steadfast in our defense of a worker’s right to a safe job—including his or her right to report injuries,” Acting Secretary of Labor Seth Harris said in a Feb. 28 statement. “When workers can’t report safety concerns on the job without fear of retaliation, worker safety and health suffer, which costs working families and businesses alike.”

Management Concerns

A newly appointed Whistleblower Protection Advisory Committee, created to make recommendations to improve OSHA’s whistleblower program, is expected to consider both employee and employer complaints, which have multiplied in recent years, focused on the slow pace of agency investigations and questions about its investigators’ competence. The 15-member committee, which held its first meeting Jan. 29, has members representing management, labor, the public, OSHA state plans and federal agencies.

Ellis says he expects the management representatives, including his co-chair, Littler Mendelson Shareholder Gregory Keating, to emphasize the impact on business. “When you protect whistleblowers, you inevitably create harmful disruption for the employer because there will be people claiming to be whistleblowers who are not true whistleblowers,” he says. “How you define a whistleblower and what procedures and remedies you provide him are very important.”

Pearlman hopes the committee will recommend a “triage process” to identify and resolve the most serious complaints more quickly. “A very serious case should get the most attention,” he says. At the same time, he hopes the process will weed out meritless cases faster as well.